Gold's Quiet Accumulation: Why Central Banks Are Rewriting the Metal's Demand Story

Central banks bought a record 288.9t of gold in Q2, led by Poland and China, supporting prices near $4,600 despite ETF outflows.

Gold is holding its ground near $4,600 an ounce, but the real action isn't in the daily tape — it's in the vaults of the world's central banks. The metal's resilience this summer rests on a foundation that has little to do with the usual drivers of investor sentiment and everything to do with a historic accumulation campaign that shows no signs of abating.

The People's Bank of China extended its buying streak to 21 consecutive months in July, according to Bloomberg, while Chinese net gold imports via Hong Kong climbed roughly 11 percent month-on-month, reflecting a pickup in private investment demand. That dual engine — official and retail — is providing a sturdy floor under prices at a moment when the market is otherwise fixated on the Federal Reserve's next move.

A Record Quarter of Official Buying

The scale of central bank participation has become impossible to ignore. The World Gold Council put second-quarter net central bank purchases at 288.9 tonnes, a 62 percent jump from the 177.9 tonnes recorded in the same period a year earlier and the strongest second quarter ever measured. Poland led the pack with 51 tonnes in the quarter, bringing its first-half total to 82 tonnes as it works toward a stated target of 700 tonnes in reserves.

China's central bank added 33 tonnes during the quarter — its largest single-quarter purchase since late 2023. Across the first half, central banks collectively bought 345 tonnes net. That pace trails the year-earlier period, but the second-quarter acceleration tells the more meaningful story. A June survey by the World Gold Council found that 45 percent of 74 central banks polled intend to add more gold, the highest share since 2018.

This official demand is offsetting a more cautious stance from ETF investors. Gold-backed exchange-traded funds saw net outflows of 45 tonnes in the second quarter, concentrated in North America. Yet the appetite can return quickly: the SPDR Gold Trust recorded roughly $637 million in net inflows on a single trading day in early August, a sign that tactical money re-enters the market once momentum builds.

The Fed Calculus Shifts

Friday's focus centers on Kevin Warsh's speech at the Jackson Hole symposium — his first in his role as Fed chair. Investors are parsing his remarks for clues ahead of the Federal Open Market Committee meeting on September 15-16, though observers caution that a definitive commitment to a rate path is unlikely, leaving the real decision for September.

Market expectations have already moved. Wednesday's PCE price index showed July inflation at 3.7 percent year-over-year, above the 3.6 percent forecast, with the core rate at 3.3 percent. Despite the hotter-than-expected print, futures markets now assign just a 38 percent probability to a September rate hike, according to CME FedWatch data. December odds sit above 70 percent. That marks a notable shift from earlier in the summer, when a run of soft employment, consumer price, and producer price data had already dragged September expectations from roughly 50 percent down to 31 percent.

The combination of sticky inflation and tempered rate-hike expectations keeps the zero-yield metal attractive. A degree of geopolitical easing has added to the mix: Iran announced Thursday it would resume talks with Oman over managing the Strait of Hormuz under US pressure, while oil prices softened in tandem.

Supply Constraints Loom

On the supply side, the picture remains tight. Global mine production runs at roughly 3,300 tonnes annually, and known economically recoverable reserves stand at about 64,000 tonnes — with few meaningful new discoveries on the horizon. Research from S&P Global indicates no significant new gold deposits were found between 2023 and 2024; since 2020, only six notable discoveries have emerged, totaling 27 million ounces in reserves and resources.

Price Positioning

Gold last traded at $4,598.94 per ounce, virtually flat against Thursday's close of $4,601.25. The monthly gain stands at 13 percent, with a 6.5 percent advance since the start of the year. The metal continues to trade 1.2 percent above its 200-day moving average of $4,545.58, underscoring the medium-term uptrend.

Warsh's remarks remain the near-term catalyst. A dovish tone would likely reinforce the softening rate-hike expectations and lend further support to gold. A hawkish surprise, by contrast, could pressure recent gains — though the structural bid from central banks and Chinese demand would likely keep any pullback shallow, whatever the policy signals from Wyoming.